Daley: No Property Tax Hike, But Chicago May See Cuts in Services

CHICAGO — Chicago Mayor Richard Daley renewed his pledge Wednesday not to raise property taxes, but warned that the city may be forced to cut some services as it grapples with a record $654.7 million of red ink in the next budget.

Daley said in his annual state of the city address that he would work to improve government management and consolidate departments to save money. But he said he couldn’t “rule out that to balance next year’s budget we’ll be forced to put many things on hold or reduce or cut some services, permanently or for a year or two. But I can assure our taxpayers that should it come to this, it will be as a last resort.”

Daley said the city has cut nearly $400 million in spending over the last two-and-a-half years as economically sensitive revenues have fallen due to the recession and employee costs are rising. Daley said the 2011 budget won’t include a city property tax increase. “People are still hurting and I don’t want to add to their burden,” he said in a luncheon address.

City finance officials last week unveiled preliminary 2011 budget figures that warn of a $654.7 million deficit in the projected $6.3 billion spending plan. A slight improvement of 1.1 % in revenue collections is expected in 2011, but the funds will still fall more than $300 million below peak 2007 levels.

At the same time, the city anticipates an additional $207 million in spending due mostly to increased employee costs from contractual raises and growing health care expenses. Daley also announced that Chicago will hire an additional 100 police officers next year as a series of high-profile violent crimes has focused attention on city crime. He also said that even in “austere budget times” the city will continue to invest in improving neighborhood infrastructure.

The size of the deficit is the bleakest projected number to date and is up from a deficit of $520 million last year. Seeking to avoid deep service cuts or major tax hikes, Daley last year relied on some debt restructuring and the heavy use of reserves established with proceeds from the city’s $1.14 billion, 75-year parking meter system lease.

The mayor last year kept his hands off the $500 million permanent reserve set up with proceeds of the $1.8 billion, 99-year lease of the Chicago Skyway toll bridge in 2005. Rating analysts upgraded the city after it established the reserve and have said it remains central to the current rating levels.

Chicago’s general obligation bonds are rated AA-plus with a negative outlook by Fitch Ratings, Aa2 with a stable outlook by Moody’s Investors Service, and AA-minus with a stable outlook by Standard & Poor’s.

City officials have left the door open to spending cuts, layoffs, union concessions, further use of reserves, and taxes and fee increases, with the exception of a property tax increase. Some City Council members are pushing to free up $700 million in surplus tax-increment financing funds. Daley did not comment in his speech on specific measures.

Daley said job creation remains a key priority as well as promoting economic growth. He praised Illinois state leaders for reforming the Metropolitan Pier and Exposition Authority to make its facilities more attractive to convention business. The reforms also allow the authority to restructure its debt. Daley has not said yet whether he will seek re-election next year.

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